Block Investment and Partial Benefits of Corporate Control
Despite familiar arguments for diversification, many investors choose to hold significant blocks of equity in the same firm. While control benefits may explain majority blocks, most blocks are much smaller. This paper develops a theory whereby such blocks can confer to their holders partial benefits of control; small block shareholders can join together and form controlling coalitions. The implications for the shareholder structure within and across firms are examined. This paper predicts large investors will 'create their own space' by staking out large enough blocks to deter other block investors, there will be a threshold level above which large investors are not challenged, and that the shareholder structure across firms will exhibit a particular clientele effect among block shareholders. Copyright 1995 by The Review of Economic Studies Limited.
Volume (Year): 62 (1995)
Issue (Month): 2 (April)
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